Hermitage Sues Russia Interior Ministry

Mar 9 2011 | 12:03pm ET

Hermitage Capital Management has sued Russia's Interior Ministry, accusing it of abuse of power.

According to the hedge fund, once one of the largest foreign investors in Russia, the ministry had no basis for launching a tax investigation of Hermitage in 2007. Hermitage claims that Interior Ministry officials used the pretense of that investigation to raid the hedge fund's offices and seize documents that they later used to defraud the Russian government of US$230 million in taxes paid by Hermitage.

The tax evasion probe eventually led to the arrest of a Russian lawyer for Hermitage, Sergei Magnitsky, who died in prison in 2009 awaiting trial. Magnitsky, who had been jailed for nearly a year, had complained about mistreatment and the withholding of medical care; Russian human rights activists have said he was tortured.

The probe also led Russia in 2009 to put Hermitage founder William Browder on Interpol's international wanted list, four years after first barring him from entering the country. Browder had been an outspoken critic of Russian corporate governance.

"This lawsuit aims to strike a major blow against those government officials who blatantly misuse their position and status," Browder said of the claim, filed in Russia's Constitutional Court. "Thousands of businesses have been targeted by corrupt Interior Ministry officials in Russia who use fabricated tax claims to extort money, terrorize people and falsely arrest them."

Browder said he is not necessarily sanguine about winning the case, but hopes it will lead to the overturning of a 2003 presidential decree giving the Interior Ministry the authority to launch criminal tax probes.

Meanwhile, British Prime Minister David Cameron last week weighed in on Magnitsky's death, promising, like his predecessor, to raise the issue with Russian officials. No one has been charged in connection with the 37-year-old lawyer's death.

"I have now been briefed about the case and am deeply concerned by its implications for the rule of law and respect for human rights in Russia," Cameron wrote in a letter to Browder. "I discussed the case with Russian Foreign Minister Sergei Lavrov when I met him" last month, and the premier promised to follow the case in advance of his planned visit to Russia later this year.

Cameron's predecessor, Gordon Brown, also said he raised the issue shortly after Magnitsky's death in late 2009.


In Depth

Why Ponzi Schemes Work: An In-Depth Look At The Allen Stanford Fraud

Dec 21 2014 | 10:30am ET

Texan Allen Stanford first appeared on the radars of financial regulators in 1997...

Lifestyle

Hedgie Funds US Squash Program

Dec 24 2014 | 8:46am ET

Squash, anyone?

Guest Contributor

EidoSearch’s Top Three Market Projections For 2015

Dec 23 2014 | 4:03am ET

It is that time of year again when prognosticators make their big market calls for...

 

Sponsored Content

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

December 2014 Cover

Futures 2014 person of the year

Jeff Sprecher was simply looking for a platform to trade energies when launching ICE 14 years ago but it has grown to reach the pinnacle of both the listed futures and equities world.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.